56573 JULY 2010 ABOUT THE AUTHORS More Synergy with Less Energy: TAHA RAFI Projects Officer managing the A Partnership Approach to Achieving Results in Financial Infrastructure MENA Credit Bureau project, joined IFC in January 2008. He is responsible for developing the strategy, financial operations, business development, and delivery of How do you achieve advisory services results on a shoestring budget (due portfolio projects across the to funding allocation adjustments and revised donor priorities) and two region. staff (almost!)? The many variables involved in managing and growing any OSCAR MADDEDU regional program--including significant time spent in procuring expertise Principal Financial Specialist with the IFC Global Credit and short-term consultants, and in fund-raising--reduce the time available Bureau Program, is a credit information and risk for project delivery. These necessary distractions shift the focus away from management expert managing client relationships and achieving impact. And, at times, they can supporting regional programs in MENA and Sub-Saharan affect the quality of outputs. This SmartLesson talks about using strategic Africa. He supported similar projects in the Latin America partnerships to help balance the external and internal factors while and Caribbean region from expanding outreach and remaining responsive to clients. With this approach 2004 to 2008. Oscar has more than 28 years of experience in our team has gone from "how do we make it through this financial year the credit and financial industry in multinational without a drop in client satisfaction and low supervision results" to "our environments. clients are so pleased that they're talking with IFC CEO Lars Thunell about APPROVING MANAGER expanding their IFC relationship!" James Gohary, Principal Operations Officer, AS MENA. Participants gather at the training center of Bank Negara (Central Bank of Malaysia) in May 2010 to enhance their understanding of the role of the credit bureau in access to finance and credit risk management. Background information market--a testament to the success of IFC's earlier awareness-raising The Credit Bureau (CB) program in the Middle efforts--is based on the acute recognition and East and North Africa (MENA) region operates strong desire of the financial sector and in a market that, with a few exceptions such regulators to develop the credit information as Egypt and Pakistan, can be broadly market. The upheaval in global financial described as being at an early stage of markets and the pivotal role of comprehensive development. The high demand for IFC credit information, quality, and risk Advisory Services (AS) in developing the credit management practices has subsequently SMARTLESSONS -- JULY 2010 1 reinforced this need. Central Bank­operated credit regional integration and cooperation, and more registries, private sector credit information providers, and resilient markets with wider outreach. credit scoring and related value-added providers have all specifically sought IFC's expertise and support in developing, · Bank Negara Malaysia (BNM), the Central Bank based in implementing, and enhancing the performance of the Kuala Lumpur: BNM is a progressive central bank located credit information market. With program resources and outside the MENA region. It has a strong interest in budget stretched early on in the financial year, a mandate promoting knowledge sharing in financial infrastructure, to prioritize conflict-affected and fragile markets achieving greater outreach, and building capacity of (characterized by high security and sporadic travel permits) other central banks. It has dedicated training facilities compounded an already challenging environment. and staff, with a significant allocated budget, and regularly hosts regional and international banking The Delivery Model sector staff. IFC's CB team in the region sought strategic partnerships An example of the benefits of such collaboration is the with organizations that have overlapping mandates to launch of an annual training event hosted by the CB promote the development of financial infrastructure, program's partner to serve the capacity building needs of particularly credit information markets, in MENA countries. IFC clients, among others, in MENA. The funding for These strategic partners provided a source of administrative logistics, speakers, and participants is borne collectively by support, headcount (two full-time resources by Year Two of BNM, AMF, and participating organizations (speakers and the project), and parallel funding ($160,000 per year for credit registry/bureau staff). The only costs to IFC are the three years). This arrangement enabled our program staff travel expenses, and time of IFC staff. Adopting this to focus on concurrently delivering advisory services to approach has allowed the CB program in MENA to remain clients in different geographical areas. The rationale for engaged with and directly deliver training to credit registry adopting this approach, instead of bringing on board staff from 13 central banks in the region. specific skills through external or short-term consultants, is primarily twofold: First, strategic regional partners are able to mobilize their own funding (third-party/parallel) to Figure 1: Results of the Partner Relationship supplement IFC's objectives in the region. Second, using the partners' staff to support the administrative activities relieves the pressure on IFC's own staff while building the capacity of the partners through on-the-job learning. This approach has allowed the CB program to actively manage three projects engaging with six credit registries in MENA, using fewer than two full-time equivalent IFC staff. The two partners engaged by the CB program are: · Arab Monetary Fund (AMF), based in the United Arab Emirates: AMF has a regional presence and a well- established network of relationships in all MENA region countries. It is a well-funded organization with a mandate to promote financial infrastructure, Delivering advisory services in collaboration with AMF and BNM efficiently addressed the funding and staffing gaps of the MENA CB program. It allowed the team to deliver on its operational strategy, covering priorities of the Access to Finance pillar in MENA and the Global Credit Bureau Program. Using the approach provided flexibility for IFC to engage with clients individually as well as through regional events while retaining control of the scope and focus of each effort. All activities were guided and delivered by the MENA CB team, while the partners played a supporting role in leveraging their network, managing logistics, organizing events locally, and providing supplementary funding. The experience with each partner has been distinct, with its own set of strengths and weaknesses. (See the figure.) Lessons Learned Oscar Maddedu, IFC's credit bureau and risk management 1) Match IFC's strategic priorities with those of the specialist, delivers training to public credit registry participants regional partners. from MENA and other regions at Bank Negara's training center in Malaysia. Potential partners typically have a positive and enthusiastic response to the possibility of working with IFC, but 2 SMARTLESSONS -- JULY 2010 enthusiasm alone is not enough. There should be sufficient overlap, for example, in such strategically important considerations as geographic focus and thematic areas. It is important to take the time to perform an objective assessment of a prospective partner's values and to be sure its management shares IFC's vision. A good way to ensure a strong correlation is to verify a formal goals statement that was made by the partner organization independently of and prior to IFC's approach. Ideally, such a statement should be included as part of the partner institution's mandate. In case such a statement does not exist, it may be worthwhile for IFC to discuss a formal endorsement of the shared goals by the senior management or even the board. Also, by highlighting the regional market needs and making a case for how they align with the partners' strategic priorities, the IFC team can strengthen the partners' buy-in and develop a shared vision for outcomes. In our case, the strategic priorities were developing the credit information market and capacity building. 2) Leverage the strategic partner's resources, and supplement deficiencies through capacity building. Shalini Sankaranarayanan from IFC's Global Credit Bureau Program conducts a session on credit information sharing and A key objective of such collaborations is to improve the the role of private credit bureaus at the training center in quality of regional resources and the depth of subject- Malaysia. matter expertise in each partner organization. The MENA CB program helped build AMF's capacity through joint country missions, where regular interaction with and shadowing of IFC experts allowed the partner's staff to · initiated discussions with 2 credit registry clients for gradually take over responsibilities. Particularly when there individual AS engagements based on IFC confidential are just a few staff to train, such on-the-job training is more report recommendations. efficient than classroom-based training, which requires blocks of time and takes IFC staff away from client-facing Regional clients' appetite for IFC's direct AS intervention, as activities. This kind of capacity building also ensures longer- well as the internal need to achieve stretch targets, made term sustainability of the platform established through the need for additional resources even greater. In response, such collaborations. and in light of our budget limitations and hiring freeze, IFC proposed bringing on board dedicated resources with IFC's collaboration with AMF within the scope of credit relevant skills through the partner organizations. With the information has been going on for 18 months and has flexibility to develop customized terms of reference. IFC has achieved the following: been able to bring in the specific skill sets to address the needs of the project and maintain significant control over · completed 6 country missions by a joint AMF and IFC the quality of staffing. team to assess the current state of the credit information market. 3) It is important to understand the partners' internal processes. · delivered 5 confidential reports containing recommendations to MENA central banks for enhancing The ability to leverage third-party or parallel funding is a the development of the credit information market. significant advantage when using an external partner to support the delivery of AS. Quicker procurement of vendor services, · drafted 3 country reports, with 3 additional reports direct access to consultants, and availability of partner funding being drafted, documenting the key stakeholders, permit IFC staff to focus on delivering expertise to our clients. regulatory environment, and growth potential of each credit market. On the other hand, if a partner's internal processes prove slower and less efficient, a trust-fund relationship should be · organized and conducted workshops during the Arab considered--as was the case with AMF's tracking of internal Credit Reporting Initiative annual meetings. budgets. Although AMF committed funds ($160,000 annually for three years) at the outset, it continues to be difficult for · developed and launched a Web site for knowledge the organization to provide for the project expenses on a sharing. regular basis and in a timely manner. This causes delays in IFC's own supervision reporting cycle and also prevents any · trained 23 public credit registry staff from 13 MENA proactive management of underspending or overspending countries; and on the project. SMARTLESSONS -- JULY 2010 3 Cornellio Pimental, World Bank consultant, delivers training to 53 participants from public credit registries in MENA, Sub-Saharan Africa, and other regions at Bank Negara Malaysia. In such a case, it is recommended that IFC's having these meetings with AMF, IFC is now regional pillar managers adopt a strategic in discussions to expand the collaboration to vision involving the partner's senior cover advisory projects in risk management, management. AMF senior management has secured lending, and trade finance. been apprised of the trust-fund structure, and--since initial discussions during the 2010 Conclusion Spring Meetings--its benefits are being explored with the relevant IFC team and AMF. The flexibility to structure the regional delivery model for AS will remain key in 4) Extract maximum value from the steering achieving impact targets. Using regional committee through regular monitoring. partners as a source of funding and head count provides a viable alternative when Quantify and agree on outputs and budget constraints prevent bringing on short- outcomes--with the involvement of IFC's term resources and funding for projects. This regional management and the partner's approach served the needs of the MENA CB senior management--while conducting program and our clients, helped maintain regular (quarterly, biannual) progress IFC's leadership role in the region, and reviews. To further improve buy-in and contributed to the development of the ensure a shared vision of the project goals, pipeline for the next fiscal year. take the time to explain the project's logic model and the indicators used by IFC. During this discussion, recognize that the partner organization may want to add indicators that reflect its own agenda. These indicators can also be revisited during the steering DISCLAIMER committee meetings, as needed, to maintain IFC SmartLessons is an awards buy-in. program to share lessons learned in development-oriented advisory services and investment This interaction is important, because it operations. The findings, helps keep the collaboration on track and interpretations, and conclusions also allows for addressing requirements such expressed in this paper are those as additional staffing, funds, and country of the author(s) and do not necessarily reflect the views of IFC priorities. Further, it is an opportunity for or its partner organizations, the regional management to better understand Executive Directors of The World the needs of the local markets and to identify Bank or the governments they opportunities based on the partner's represent. IFC does not assume any responsibility for the appetite relative to IFC's own priorities. completeness or accuracy of the Lastly, the senior leadership of each information contained in this organization can align mandates that, in this document. Please see the terms case, have provided a balanced approach and conditions at www.ifc.org/ toward engaging the public sector to smartlessons or contact the program at smartlessons@ifc.org. facilitate changes in the private sector. By SMARTLESSONS -- JULY 2010 4